Five years ago, in a previous edition of Point of View, we drew up
a picture of the main requirements and qualities for which the
market was looking when searching for chief financial officers and other finance professionals. In a nutshell, these related to leadership, strategic competencies, operational expertise, deal-making capabilities, risk management proficiency and communication skills. In 2001, a large number of financial officers
were very popular in the national, and even international, media.
Their public profiles often exceeded their actual contributions to
their businesses. Times have changed dramatically for financial
officers. The bursting economic bubble, accounting and corporate
governance scandals, and the subsequent dramatic change in
regulatory and governmental requirements have altered the role.
From our experience recruiting financial officers worldwide across
all industries and for organizations varying from start-ups, NGOs
and plcs to sophisticated global companies, we have been in a
position to see the evolving role, and update the profile of, today’s
ideal chief financial officer, as sought by the market.
A central role
The finance function remains highly valued and is considered
absolutely crucial in any company’s success. It is clear in 2006
that financial officers and their specialists are positioned at the
heart of their respective organizations. In many cases, their
internal profile has been raised by providing key information
linking data to operating outcome and strategic goals. Financial
management has transformed itself from a purely numerical
function to one where the ability to interpret figures and data can
have a substantial impact on the strategies and operational courses business line managers take. More importantly, having the insight to accurately gauge the future direction of the business is a great advantage and one that has the ability to exercise a huge influence on both the operational course and the long-term strategy of any organization.
The core elements of the chief financial officer role
Following a systematic review of recent search assignments
around the world, we have defined four common elements in the
profile of today’s most successful chief financial officers. Each has
to be:
- a strategist: helping to develop the business
- a custodian: taking care of corporate governance and risk
management
- an operations chief: ensuring streamlined transaction
processing and production of reports and accounts
- a catalyst: leading from the front to ensure that any
operational or strategic activity is executed effectively and
delivered on time.
This represents a shift from some of the key attributes popular
during the last economic bubble, particularly with regard to the
importance of communication and deal-making skills — these
remain important, but their relative weighting has been reduced.
In short, the requirement is more for strategy and less for detail
— the CFO needs to be a business advisor, not just a manager of
the financial aspects of the business.
Strategist
As the chief advisor to the CEO and, very often, to members of the
board, today’s CFO is required to have an intimate understanding
of the company’s key missions and to show evidence of in-depth
understanding of its strategic dimensions, going well beyond
purely financial matters. He or she is expected to add value
through a focus on strategic efficiency, i.e. the capacity to stay on
course while having the flexibility to adapt to short-term and other
operational obstacles and challenges. The financial officer must
demonstrate strategic clear-sightedness, i.e. the ability to steer the
company on a given strategic course, while remaining alert to any
element that may positively or adversely affect that goal.
Finally, the financial officer must guarantee strategic consistency,
nurturing a strategic course also through non-financial values, for
which however investments or risks might have to be incurred.
Custodian
There is no doubt that the scandal-ridden period between 2000–2004 taught many companies some hard lessons. As a consequence, the financial officer is now required to be the
gatekeeper of various different and nationally-defined corporate
governance cultures, handling such things as reputation and general risk, political correctness, capital management constraints and shareholder expectation. The role and responsibility of policy enforcer has grown significantly, making today’s financial officers far more than their predecessors, liable and accountable to directors, shareholders and their CEOs.
Operations chief
This is an area where sophistication has also increased, albeit
in a manner that can still be linked to past situations and
requirements. Spotting market trends, client needs and new
business developments remains a key part of financial officers’
tasks, as does the capacity to critically question business
managers’ tactical goals and decisions. However, this has not
changed fundamentally since the turn of the millennium.
Catalyst
The CFO is expected to educate board members and executive
committee colleagues on regulations much more than even a few
years ago. The challenge of merging business entities, of bringing
business cultures closer to each other, or of embedding one’s
company into a given social and political environment, means that
financial officers must show greater awareness of stakeholders,
local communities and diverse environmental factors, and be
able to factor these into their company’s development. In this
regard, conflict management, organizational agility, dealing with
ambiguity as well as change and relationship management, have
all evolved to be crucial skills for financial officers in recent years.
A CFO is also expected to instil inspiration into the company and
turn his or her own financial organization into a role model or
centre of excellence. Soft skills and the ability to interact well with
others are closely correlated to these requirements.
Conclusion
Performance, growth and risk are undoubtedly the three issues
that now rank at the top of the financial officer’s agenda. No
candidate for a complex financial officer position can avoid being
able to demonstrate the corresponding experience, proficiency and
talent required to perform the role to the highest standard.
The increasingly pervasive influence of the chief financial officer
on a company’s management is currently exercised through
the four core roles of strategist, custodian, operations chief and
catalyst. In the ever-changing environment affecting market
players, these qualities now reflect most accurately the ability of
financial officers to best meet the demanding challenges of
their role.
This article forms part of the Switzerland Point of View: Winter 2006.